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Tech Industry

Y2K suits likely to keep coming

Legal analysts predict that the Year 2000 bug will be to litigation what El Niño has been to global weather.

For months, legal analysts have predicted that a computer glitch created by the approaching year 2000 will be to litigation what El Niño has been to the weather. Now, some of them are saying that two class-action suits filed over the problem in as many months amount to the first signs of precipitation.

Both suits have been filed by Milberg Weiss Bershad Hynes & Lerach, the plaintiffs' law firm responsible for zinging dozens of businesses each year--from Oracle to Silicon Graphics--with stock fraud suits. Given the coincidental convergence of the Year 2000 problem with new laws making it harder to win fraud suits, some attorneys say there will be a deluge of class actions targeting software vendors.

"No question about it. Milberg Weiss has just started gearing up," said Steven Hock, a software litigator specializing in Year 2000 bug issues at Thelen, Marrin, Johnson & Bridges. He predicted that a number of other top-flight plaintiffs' firms will be filing similar suits.

The latest was filed last week against Symantec on behalf of customers of Norton AntiVirus software, alleging breach of warranty and other claims in connection with Symantec's flagship product, which the complaint says can not recognize the year 2000.

The suit came a month after a New York hardware company filed a similar suit seeking $50 million from software maker SBT Accounting Systems. Both suits seek class-action status, meaning that other aggrieved parties also could become plaintiffs in the litigation.

Despite Hock's and other attorneys' predictions, however, others are not so sure that the Symantec suit will bring with it a rising tide.

"Whether this is going to be the beginning of what some people think will be a flood will depend on what the courts do with [the suits]," said Bill Fenwick, a partner at Fenwick & West. He said the suits face a number of hurdles that all are highly dependent on the particular facts of a given case.

For instance, the provisions of a software license, the applicable statute of limitations, and the barriers involved in persuading a court to grant class certification all are challenges that might prevent a major onslaught of suits from materializing.

Still, Fenwick agreed that plaintiffs' firms like Milberg Weiss are likely to view the Year 2000 bug suits as a potential source of revenue and, therefore, will devote significant resources to making their cases in court. The trend comes two years after federal legislation made it harder for plaintiffs' firms to prevail in fraud suits filed against companies that suffer sharp declines in their stock prices.

"If 90 percent of your business is in filing security class actions, by God, you better start diversifying your bets," Fenwick said.

Salvatore Graziano, a partner at Milberg Weiss, said a special Year 2000 group the firm formed is "looking at a number of problems" other software users are having. "We certainly believe there are legitimate lawsuits that arise out of this problem," he said. "We are looking at a number of other potential suits."

Graziano declined to say how many attorneys comprise the special group or when it might file another suit.

The Year 2000 bug has its roots in antiquated hardware and software formats that denote years in two-digit formats, such as 98 for 1998 and 99 for 1999. The glitch will occur after the year turns over to 2000, when computers are fooled into thinking the year is 1900. The glitch could throw out of whack everything from bank balances to elevator maintenance to building security procedures.

The problem has not been lost on federal officials. Just today, the Securities and Exchange Commission released proposed regulations that would require firms to give updates on how they are making their systems year 2000-compliant. (See related story) The House has gotten into the act too, passing a bill that is designed to help banks and other financial institutions prepare for and deal with the bug.

Vito Peraino, who has testified on the bug in Congress, said that, despite the problems posed by the Year 2000 glitch, few companies are prepared to deal with it. For one thing, he said, many companies that buy and sell software are likely to find themselves as both plaintiff and defendant in the suits. For another, relatively few attorneys are up to speed on the technical and legal issues surrounding the issue.

"This is one of the most complicated and involved legal problems I've ever seen in my life," said Peraino, an attorney at Hancock, Rothert & Bunshoft. "The legal learning curve is still very low and very slow."